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Technology specialist QuantumScape (NYSE:QS) — which is researching and developing solid-state batteries (SSBs) for electric vehicles — has struggled badly since peaking in December 2020. However, some developments could help potentially lift QS stock from the doldrums. A critical test will occur on April 24, when the company is scheduled to release its first-quarter earnings report.
During the three months ended March 31, QuantumScape made a significant change at the top. In February, the company announced the appointment of Dr. Siva Sivaram as the new CEO. As well, Dr. Sivaram would take a board seat. According to the company’s press release, the new head executive commands a wealth of experience in tech and manufacturing.
In addition, QuantumScape achieved several important milestones that it claims have set the foundation for future growth. In particular, its prototype battery cell achieved more than 1,000 full-cycle equivalents with 95% discharge energy retention during laboratory tests.
Further, the company made key improvements to the components and processes necessary to transition from prototype to product. It also bolstered its balance sheet with a follow-on offering, along with strengthening relationships with original equipment manufacturer (OEM) partners. QS stock has been steadily marching higher since Monday.
QS Stock Faces Steep Challenges
For the upcoming Q1, analysts on average anticipate a loss per share of 23 cents. Currently, the company doesn’t generate revenue and is not expected to generate revenue in the current fiscal year. However, covering experts believe that sales could materialize in fiscal 2025. The average estimate calls for $5.38 million, with the high-side estimate targeting $18 million.
Still, a major concern for QS stock is that investors may be running low on patience. First, while the average quarterly surprise last year came out to 1.43%, the company – without revenues – is obviously losing money. Per data from Gurufocus, the retained loss since the end of Q4 2023 came out to nearly $2.9 billion.
Another major headwind working against QS stock is competition. While SSBs hold great promise for the broader adoption of EVs, QuantumScape isn’t the only name in town. Automotive giant Toyota (NYSE:TM) has also invested heavily in SSB technology, claiming some impressive early results.
If that wasn’t enough of a headache, developing an SSB itself is extraordinarily difficult. While SSBs promise higher energy densities, the platform is also prone to dendrite formations. And that can lead to cracks in the electrolyte, resulting in short circuiting in the battery cell. Therefore, even Toyota is tempering expectations for its SSBs.
Why It Matters
Currently, QS stock incurs a short interest of 15.55% of its float. Its short ratio is also elevated at 12.9 days to cover. These stats could make QuantumScape a target for short-squeeze speculation. However, it’s worth noting that analysts rate QS a moderate sell, with an average price target of only $6.13.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
